An NRI must give careful thought to his investments in India. While mutual fund investments are not taxed in India, you may have to pay tax if you decide to go back to your native country. Also if you redeem your mutual fund investments, before one year, you end up paying short term capital gains. Similarly, your investments in income funds, over Rs. 1,00,000 are heavily taxed. So it advisable to limit your investments in these funds up to Rs. 1,00,000. Invest the remaining surplus amount in growth scheme of equity funds. Similarly if you get a dividend from your investment in Indian stocks, remember it will be taxed, as it is regarded as the income originated in India. So try to limit your exposure to direct stock market investment.
You have decided to move back to India after a stint abroad. You want to bring over not only your family but also your money to India. However while bringing over your money to India you should take care to ensure it is done in such a way so as to reduce your tax liability and let you repatriate it back to your residence abroad, should you opt to move back. Also you need to take care of tax issues, if your annual income in a current financial year includes your earnings abroad. Besides, investments are another issue that need to be considered. Here is how you should tackle these issues.
Open a suitable bank account: As an NRI, you can choose from various types of accounts, designed for NRIs. Non-Resident Ordinary (NRO) Savings Account, Non-Resident External (NRE) Savings Account and Foreign Currency Non-Resident (FCNR) Deposit Account are some types of bank accounts available to NRIs. Before deciding on which account is suitable for you, take into account the following points:
- What are the sources of the funds for depositing in the bank account? Are these funds obtained from Indian sources or repatriated (brought back home) from overseas?
- In which currency you want to maintain the account?
- Do you plan to repatriate (restore) the currency into the foreign currency, in order to take it abroad?
- How will this money be taxed in India?
If you want to maintain the account in rupees, then NRE account is suitable for you. Your funds in foreign currency are converted into Indian rupees, at the existing foreign exchange rates prevalent at the time of depositing the money in the account. You cannot use this account to deposit your income earned in India. The principle as well as the interest is completely repatriable(can be restored) and non-taxable in India. In case of joint accounts, you must have only other NRIs as account holders.
If you want an account to repatriate (restore) your foreign funds as well as Indian earnings, NRO account is suitable for you. The interest earned by the funds in this account is taxed in India and there is an upper limit of $1 million on the repatriation of funds from this account. This account can be held jointly with other NRIs or resident Indians.
If you want to eliminate the risk of foreign currency conversion and repatriate (bring back) the funds in your account without paying any taxes, then FCNR account is suitable for you. However just as with NRE account, you cannot deposit your Indian earnings in this account and cannot hold it jointly with resident Indians but only with other NRIs.
So if you plan to repatriate your funds to your country of residence without paying any taxes, then NRE and FCNR accounts are appropriate for you. But if you plan to reside in India permanently, then NRO account can help.
Income tax liability: Of course, once you settle down in India, you will be working and earning income here. It means you will have to pay tax on your earnings for the entire year. But what happens if you have already paid tax on the portion of your income while you were working abroad? It is not fair to pay tax on the same amount twice. Hence you should take benefit of the double taxation treaty signed between India and other countries. You have to submit the Residency Certificate given by the income tax department of your resident country, at the time opening a bank account or subsequently. It will help you get tax credit for the amount on which you have already paid tax, or you may not have to pay the tax, thereby reducing your tax bill.
Watch out for taxes on Investments: An NRI must give careful thought to his investments in India. While mutual fund investments are not taxed in India, you may have to pay tax if you decide to go back to your native country. Also if you redeem your mutual fund investments, before one year, you end up paying short term capital gains. Similarly, your investments in income funds, over Rs. 1,00,000 are heavily taxed. So it advisable to limit your investments in these funds up to Rs. 1,00,000. Invest the remaining surplus amount in growth scheme of equity funds. Similarly if you get a dividend from your investment in Indian stocks, remember it will be taxed, as it is regarded as the income originated in India. So try to limit your exposure to direct stock market investment.
To relocate successfully from your original country to India, start by opening the correct account that meets your requirements, taking care of your tax liability and preparing a proper investment plan, so that you benefit from the high returns offered by Indian stock markets, while reducing your tax liability.
if nri retrn after 10yrs. example (dec1998 to nov 2008 at aroad).what is the benefit get from ndian government?what should do with nre a/c balance? to change within how many days?can open in another bank resident sb a/c before change nri a/c in his bank?need todeclare foreign property during file tax return submit?
If you are coming after 10 years you must be from either US or UAE countries and couldn't get the passport of these country which means you still maintain Indian Passport then you are feel free to welcome anytime. Benefit is the Indian govt. will still accept you and let you in the country. If you have any saving account close it and make sure take all documents stating last 3 yrs transaction from the bank before closing it and open it once your back in India.
Although- They close/dormant the account after certain time if there is no activity in it. For instance- SBI a/c in canada and SBI a/c in India for the same person are not linked (may be linking for money transfer or recurring payments/receivables but thing to do with real linking or sharing information)
Once in India, you can open an account with Non-resident status and continue receiving remittances. You can also do NR Term deposits available with 4/ 5 major currencies like US$,UK£, Euro, Japanese Yen and UAE Dinar. Please note that Banks are not uniform in offering the foreign currency FDs and currencies might differ. Also, over a period of time if you are not sure about going abroad, it is advisable to convert your Forex savings in an RFC (Resident Foreign currency) account and maintain the same. Once that you are decided about settling down in India, transfer your status to Resident from the Non-resident one officially in a written communication and obtain confirmation from the Bank regarding the same.
How long can I continue to maintain my NRE account after returning to India for good.
6 Months only
I really appreciate your post and you explain each and every point very well. Thanks.
returning back to India with family after 15 years. how can i take back my gold ornaments & biscuits that i have purchaced in last 15 years as savings for future? is there any no-tax option as an NRI returning to India ?
suresh
Hi my Query is this if i am working in Abroad And sending my savings for my parents who is in india, so i have to pay tax on amount which they receive in india or it tax free? please advise.
NO the money won't be taxed-
Only if you are an India citizen and living more then 6months on continuous basis outside India and where the will be send from + money must be taxed from the country it generated from.
You can send as much money as you won't.
for the larger amount its good to send from the wire transfers.
Dear Team,
I picked up an assignment in Hong Kong on 9th Sep 2011 and relocated to HK on 11th Nov 2011. For the fiscal year April 2011-March 2012, I was taxed as per the government rule as Resident and Ordinary Resident.
Please advise what will be the best time/month for me if I plan to move back to India for good and pay minimum of the taxes?
Thanks
Ajay Gaur
Hi there,
Great piece of advice for NRIs planning to move back to India…
I think there are a few other important things which can be added on to the list to make it a comprehensive list. My suggestions below:
1. Have a definitive convincing answer for yourself – Why do you move back to India? The answer to this question will govern how your transition will happen. Do you want to move permanently with no bonds to the country you reside in or do you have a home here – you need to take all that into consideration before making the move and planning accordingly.
2. Plan early – this will give you good time to prepare financially before you start the repatriation process. If you have stuff that needs to be taken along to India, compare freight companies well before to get good quotes – you can save a lot of money after comparing quotes.
3. Ensure you have the right documentation – valid Visa, Passport and other important documents. Bonus tip – keep the documents with you, don’t send them using freight carrier.
4. Settle all accounts in your resident country before making the final move. Leaving any transaction/unsettled may affect your credit score (not good if you plan to come back) and also might end up in legal issues.
5. Make sure you get the best exchange rate – if you plan to settle permanently in India, you might have savings here that you want to send to India in bulk which makes it even more important to get the best rates of currency. So, do some shopping around and get quotes from different money transfer companies to get the best rates. Don’t worry! You can do this online.
6. Finally, allow yourself time to settle in – it takes time to get settled in a new place – especially if you are moving with your family. Don’t forget the time and struggle you faced when you left India in the first place. Don’t feel distressed for having made the move and look forward to the new move.
I hope these tips help others in addition to the worthy points on this article.
Cheers
Aman
Hi Aman,
Thanks for your awesome inputs!
Cheers,
Team BankBazaar
Dear Sir,
We have been living in US for 15 years(green card holder).Now we want to go back to India, along with money we earned so far. We request you to advise us on the above matter, including transfer of our earnings, movables etc.
Thanks
Chandra
Hi Chandrasekaran, While we do provide general tips and advice on personal finance, we will not be able to provide guidance on specific queries. We would love to help but due to the specific nature of your question, we suggest that you consult a financial advisor for guidance on this. Cheers, Team BankBazaar
NRI moving back to India
Hi Malik,
Thanks for getting in touch. We’d love to help you! Please elaborate on your question so that we can get back in touch with you with the relevant solution and information.
Cheers,
Team BankBazaar